Posts made in April 2014

10 Reasons Middle Market Companies Should Grow Their Businesses

Gary Miller

Why Grow Your Company and Build Scale?

 Gary Miller, CEO GEM Strategy Management, Inc.

 I recently was visiting with the CEO with company revenues of approximately $160 million.  After exploring a number of issues he was facing trying to grow his company, we concluded he should grow his company for 10 major reasons. If done correctly, growing his company could provide significant “enterprise value creation” and broadens the range of “exit strategies” for shareholders and investors.  

Here are the 10 reasons to scale your business.

  • Market Power
    • Market power gives greater credibility,
    • Competitive advantage,
    • Preferential treatment,
    • Flexibility,
    • Momentum,
    • Stability,
    • Market coverage,
    • Cost savings, and,
    • Financial strength compared. 
  • Inventory Power
    • Inventory power givesopportunities to increase margins;
    • Investors can “maximize” their “returns” while the firm maximizes its profits.   
  • Recruiting Power
    • Larger organizations have greater access to higher quality talent than do smaller firms, translating into more and higher caliber clients.
    • Size and scale create the perceptions of “success”, growth, professional support, prestige and “career stepping stones”.

 

  • Marketing Power
    • Larger organizations can cover more geography,
    • Can command lower advertising rates do to media volume discounts,
    • Can lower advertising production and promotion costs,
    • Have greater target audience “reach”,
    • Have greater PR and Media relations opportunities,
    • Have increased “brand name” recognition,
    • Can reach investor prospects and current clients more efficiently,
    • First mover advantage can become a “real” option, 
    • Larger scale operations improve corporate image, reputation and “Brand” power,
    •  Investors and financial community take notice creating momentum for new and additional “strategies”.

 

  • Negotiating Power
    • Larger organizations can attract, recruit, and retain higher caliber professionals than smaller organizations.  Employee culture is established,
    • Client turnover is reduced,
    • New client acquisitions costs are lowered, and,
    • “Bottom lines” are higher.

 

  • Cost Reduction Power
    • Larger organizations can scale to the optimum efficiencies,
    • Operating expenses can be reduced,
    • Standardization of  policies, practices and procedures reduce management inefficiencies,
    • Substitution of technology for labor intensive tasks,
    • Purchasing through master contracting and quantity purchasing, and,
    • Forward contracting to lock in costs of materials, labor and suppliers.

 

  • Technology Power
    • Ability to leverage hardware and software technologies to master contracting,
    • Maximize growth, operations, earnings and competitive advantage through technology leverage, and,
    • Opportunity to create intellectual property and capital. 
  • Growth Power
    • Synergize the business to meet client needs through other related enterprises;
    • Provide a holistic approach with a comprehensive portfolio of services that can “touch” clients multiple times throughout the client life cycle,
    • Building repeat business creates strong “bonding” and “loyalty” opportunities.

 

  • Competitive Advantage Power
    • Scale leads to critical mass.
    • And critical mass creates opportunity to leverage critical business applications, components, processes, and practices that accelerate growth, earnings, cost reductions, operations excellence and a solid, safe and secure work environment.
    • This environment creates confidence among investors, shareholders, lenders, and professional staff and ultimately leads to greater building more enterprise value.

 

 

 

  • Earning Power
    • Large scale organizations can earn more for all stakeholders because “scale and critical mass” can produce greater growth, synergies, resources, lower costs and more options than small organizations.  Therefore, margins are increased and earnings are improved while operating expense rates are lower.
    • More earnings produce financial stability, clout, flexibility and the ability to take advantage of investment opportunities.

To learn more how GEM Strategy Management, Inc. can help your company grow and expand, please contact us at gmiller@gemstrategymanagement.com or 970.390.4441